Crypto regulation will no doubt be a burning topic in major financial hubs this year, and Hong Kong is no exception.

The city currently has no specific legislation governing the promotion of crypto-assets. The regime governing the offering and marketing of financial products will only be relevant if a crypto-asset qualifies as a security, according to legal firm Norton Rose Fulbright.

But that is set to change. The crypto press reported this week that Hong Kong’s Financial Secretary Paul Chan is looking to enforce legislation from June 2023 onwards, despite the anti-crypto stance of China more broadly.

Retail potential

Chan said on Monday at a Web3 summit that it would be a “great place for crypto, fintech and other startups this coming year”. The city is also planning a consultation on crypto platforms, exploring the potential for retail participation in the industry, the details of which will be published soon, he added.

A bill agreed on Wednesday will see crypto exchanges subjected to the same same anti-money-laundering (AML) and counter-terrorist financing legislation as traditional financial institutions. The Securities and Futures Commission (SFC) will also seek public views about specific guardrails for retail trading, said Julia Leung, chief executive officer at the commission, according to a Reuters report. The Hong Kong securities watchdog will also propose a list of tokens it would allow for retail investors’ trading.

Sustainable development

Hong Kong’s Financial Services and the Treasury Bureau (FSTB) laid out a Policy Statement on the Development of Virtual Assets last year. In it the Bureau said: “With Hong Kong’s world class financial infrastructure, legal and regulatory regime, we aim to promote the sustainable development of financial services across the whole virtual asset (VA) value chain, covering issuance of VA, tokenisation, trading and settlement platforms, financing and asset management, and custody etc. The Government is prepared to embrace the future of finance and commerce, supporting the underlying technologies of VA and promoting their benefits in our market, and we welcome the clustering of Fintech and VA community and talents in Hong Kong”.

Justin Sun, founder of cryptocurrency Tron, founded in Singapore, told Bloomberg TV in December that China was using Hong Kong as an “experimental base so they can see all the feedback, all the results, once they adopt crypto”.

Hong Kong’s stance contrasts with that of other jurisdictions, many of which have taken a more pessimistic outlook on crypto following the collapse of exchange FTX in November 2022.